Order in the matter of ' Dolphin Universal Rural Development Limited

WTM/RKA/EFD/164 /2016 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTIONS 11(1), 11(4), 11A AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 IN RESPECT OF DOLPHIN UNIVERSAL RURAL DEVELOPMENT LIMITED (PAN:AAECD1060C); ITS PAST/PRESENT DIRECTORS, VIZ. SHRI SUBHAM BOSE (DIN:03224525), SHRI ANINDYO PAUL (DIN:03377719), SHRI KOUSHIK DUTTA (DIN:05211731), SHRI DEBRAJ MITRA (DIN:06493364), SHRI SAUGATA BASU (DIN:03566418, PAN:AFUPB7369C), SHRI RANA SIKDAR (DIN: 06601772) AND ITS DEBENTURE TRUSTEE, VIZ. DOLPHIN DEBENTURE TRUST (REPRESENTED BY ITS TRUSTEE VIZ. SHRI SUMIT JANA). 1. Securities and Exchange Board of India (“SEBI”) conducted a preliminary inquiry into the issuances of Secured Non-Convertible Redeemable Debentures ("NCRDs”)by Dolphin Universal Rural Development Limited (hereinafter referred to as 'DURDL' or 'the company') with a view to ascertain the possible non-compliances with the public issue norms stipulated under the provisions of Companies Act, 1956/2013 and other applicable laws including the SEBI Act and SEBI Regulations/Guidelines. Pursuant to the preliminary inquiry, SEBI passed an ad interim ex parte order dated May 27, 2015(hereinafter referred to as “interim order”) in respect of DURDL and its directors viz., Shri Subham Bose, Shri Anindyo Paul, Shri Koushik Dutta, Shri Debraj Mitra, Shri Saugata Basu, Shri Rana Sikdar and its Debenture Trustee, viz. Dolphin Debenture Trust (represented by its trustee viz. Shri Sumit Jana), inter alia, in view of the following: i. DURDL (CIN:U45200MP2012PLC027462) was incorporated on January 11, 2012 with the RoC, Gwalior having its registered office at Udaygiri Apartment, Ground Floor, Dainik Bhaskar Lane, P. S. Jayendraganj, Gwalior, Madhya Pradesh, India- 474002. ii. The present directors of DURDL are Shri Subham Bose, Shri Anindyo Paul, Shri Koushik Dutta and Shri Debraj Mitra. Shri Saugata Basu and Shri Rana Sikdar were past directors of the company.

Order in the matter of Dolphin Universal Rural Development Limited iii. It is observed from a copy of the minutes of meeting of Board of Directors of the company held on January 18, 2012 that Board of Directors of the company passed a resolution to issue secured redeemable non-convertible debentures in terms of meeting of Board of Directors held on January 17, 2012 and in terms of approval of shareholders of the company in EGM held on January 18, 2012. It is observed from the MCA website that the company has created a charge of Rs. 50 Crores on January 31, 2012 in favour of Dolphin Debenture Trust (represented by its trustee viz. Shri Sumit Jana) having address at 46/31/1, Gariahat Road, 4th Floor, Ballygunge, A C Market, Kolkata, West Bengal, India – 700029. iv. It is observed from copies of certificates of NCRDs provided by complainants that DURDL issued NCRDs having face value of Rs. 100/-. It is also observed that the company floated two schemes viz., (i) Monthly Income Scheme (MIS) and (ii) Single Time Scheme (STS). The MIS schemes were for 15 months, 24 months, 36 months, 48 months & 60 months. The plans under STS were for 60 months, 84 months & 168 months. Further, these certificates of DURDL indicate the issue of debentures as "Private and Confidential Placement". v. It is also observed from the copies of NCRDs provided by complainants that DURDL allotted NCRDs during FY 2012-13 and FY 2013-14 to at least 92 investors and mobilised funds amounting to Rs.99,79,500/-. The Details of the same are as under-

Financial Year Number of investors Amount Deposited (in Rs.) 2012-13 78 79,11,500 2013-14 14 20,68,000 Total 92 99,79,500

2. By the interim order following interim directions were issued against DURDL, its directors and its Debenture Trustee: “i. DURDL shall forthwith cease to mobilize any fresh funds from investors through the Offer of NCRDs or through the issuance of equity shares or any other securities, to the public and/or invite subscription, in any manner whatsoever, either directly or indirectly till further directions; ii. DURDL and its present/past Directors, viz. Shri Subham Bose (DIN:03224525), Shri Anindyo Paul (DIN:03377719), Shri Koushik Dutta (DIN:05211731), Shri Debraj Mitra (DIN:06493364), Shri Saugata Basu (DIN:03566418, PAN:AFUPB7369C) and Shri Rana

Sikdar (DIN: 06601772), are prohibited from issuing prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities, in any manner whatsoever, either directly or indirectly, till further orders; iii. DURDL and its abovementioned Directors, are restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in the securities market, either directly or indirectly, till further directions; iv. DURDL shall provide a full inventory of all its assets and properties; v. DURDL's abovementioned Directors shall provide a full inventory of all their assets and properties; vi. DURDL and its abovementioned Directors shall not dispose of any of the properties or alienate or encumber any of the assets owned/acquired by that company through the Offer of NCRDs, without prior permission from SEBI; vii. DURDL and its abovementioned present Directors shall not divert any funds raised from public at large through the Offer of NCRDs, which are kept in bank account(s) and/or in the custody of DURDL; viii.

DURDL shall furnish complete information sought by SEBI vide letters dated January 20, 2014 and August 19, 2014 including the balance sheet of the company for FY 2013-14 and FY 2014-15 within 21 days from the date of receipt of this Order. ix. The Debenture Trustee, viz. Dolphin Debenture Trust (represented by its trustee viz. Shri Sumit Jana), is prohibited from continuing with its present assignment as a debenture trustee in respect of the Offer of NCRDs of DURDL and also from taking up any new assignment or involvement in any new issue of debentures, etc. in a similar capacity, from the date of this order till further directions..” 3. Vide the interim order, DURDL and its directors were called upon to show cause as to why suitable directions/prohibitions under sections 11(1), 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act”) including the following, should not be taken/imposed against them: “i. Directing them jointly and severally to refund the money collected through the Offer of NCRDs along with interest, if any, promised to investors therein; ii.

Directing them to not issue prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities, in any manner whatsoever, either directly or indirectly, for an appropriate period; iii. Directing them to refrain from accessing the securities market and prohibiting them from buying, selling or otherwise dealing in securities for an appropriate period.”

4. Further, Dolphin Debenture Trust (represented by its Trustee, viz. Shri Sumit Jana) was also called upon to show cause as to why suitable directions/prohibitions under sections 11(1), 11(4), 11A and 11B of the SEBI Act including restraining it from accessing the securities market and further restraining it from buying, selling or dealing in securities, in any manner whatsoever, for an appropriate period should not be issued. 5. Interim order in the matter was passed on May 27, 2015and was hosted on SEBI’s website. The interim order was also sent to the entities on May 28, 2015 through RPAD on the addresses available on record. As mentioned in paragraphs 22 and 23 of the interim order, DURDL, its directors and Dolphin Debenture Trust (represented by its Trustee, viz. Shri Sumit Jana) were required to file their replies to the interim order within 21 days from the date thereof. 6. Vide letter dated June 20, 2015, Mr. Dulal Dey (Advocate representing Mr. Saugata Basu) stated, inter alia, as under: i) His client has never induced anybody to invest money in the said NCRDs. The decision making power was in the hands of Mr. Subham Bose and Mr. Anindyo Paul. ii) His client was a paid employee of the company and resigned from the directorship of the company since July 4, 2013. iii) All the employees of the company were designated as Directors cum employees.

This was the policy of the company and was one of the pre-condition to get the service and / or employment in the company. iv) His client never mobilized any funds in the past and present from any person through the offer of NCRDs and never issued any prospectus or offer document or issue advertisement soliciting money from the public for the issue of securities. v) His client never represented as a trustee of Dolphin Debenture Trust. 7. None of the other entities filed any reply in the matter during the said period of 21 days or thereafter. In the interest of natural justice, an opportunity of personal hearing was provided to DURDL, its directors and the debenture trustee on October 18, 2016, the notice whereof was sent to the entities vide letters dated September 19, 2016. The said information regarding the date of hearing was also published on August 28, 2016 and August 29, 2016 in leading vernacular newspapers (Anand Bazar Patrika and Dainik Bhaskar) and one leading National English newspaper (Times of India). However, all the entities failed to avail the opportunity of hearing on October 18, 2016. Considering the above, I am of the view the principles of natural justice have been complied with in these proceedings.

I also find that that sufficient opportunities to file reply/submissions and appear for personal hearing have been provided to the entities and this matter should now be disposed of on the basis of the material available on record. 8. I have considered the interim order, the allegations levelled against DURDL, its directors and Dolphin Debenture Trust (represented by its Trustee, viz. Shri Sumit Jana) and the material available on record. The prima facie observations contained in the interim order were made on the basis of the material available on record i.e. information/documents obtained from the Ministry of Corporate Affairs' website i.e. 'MCA 21 Portal'; complaints received and the documents enclosed therewith. 9. The core allegation in the interim order is that DURDL made a “public issue” of NCRDs without complying with provisions of law regulating such public issues i.e. sections 56, 60, 73, 117B and 117C of Companies Act, 1956 and regulations 4(2)(a), 4(2)(b), 4(2)(c), 4(2)(d), 4(4), 5(2)(b), 6, 7, 8, 9, 12, 14, 15, 16, 17, 19 and 26 of Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 (hereinafter referred to as “ILDS Regulations”).

10. As noted in the interim order, during the period FY 2012-13 and FY 2013-14,DURDL had issued NCRDs to 92 investors and had mobilized 99,79,500. The particulars of allotments are as under:

Financial Year Number of investors Amount Deposited (in Rs.) 2012-13 78 79,11,500 2013-14 14 20,68,000 Total 92 99,79,500

11. The findings of the interim order have not been disputed by any of the entities. Undisputedly, DURDL issued NCRDs amounting to 99,79,500during the period FY 2012-13 and FY 2013-14 to 92 investors. Thus, by virtue of the proviso to section 67(3) of the Companies Act, 1956, the issuances of NCRDs by DURDL were public issues. In this regard, it is important to mention that all the controversies with regard to questions such as whether an offer to 50 persons or more is a public issue or private placement, SEBI's jurisdiction on issuance of securities including NCRDs, intention/obligation to list such securities, etc. have been settled by the Hon'ble Supreme Court in its judgment and order dated August 31, 2012 in the matter of Sahara India Real Estate Corporation Limited &Ors. Vs SEBI &Anr. - Civil Appeal No. 9813 and 9833 of 2011[(2013) 1 SCC 1] (hereinafter referred to as “the Sahara Order"). 12. I note that since the issuances of NCRDs by DURDL during the period FY 2012-13 and FY 2013-14 were public issues, it ought to have complied with the applicable provisions of the Companies Act, 1956 (read with the corresponding provisions of Companies Act, 2013) and ILDS Regulations as noted in the interim order.

In the present case, there is no dispute as to the fact that DURDL, while making the aforesaid “public issues” of NCRDs, had not complied with the provisions of sections 56, 60, 73, 117B and 117C of the Companies Act, 1956, regulations 4(2)(a), 4(2)(b), 4(2)(c), 4(2)(d), 4(4), 5(2)(b), 6, 7, 8, 9, 12, 14, 15, 16, 17, 19 and 26 of ILDS Regulations. Since the requirements of these applicable provisions and the relevant observations of the Hon’ble Supreme Court in the Sahara Order have been clearly stipulated in the interim order, I do not deem it necessary to reiterate the same and burden this order with the same findings. 13. In terms of section 291 of the Companies Act, 1956, the Board of Directors of a company shall be entitled to exercise all such powers and do all such acts and things as the company is authorized to exercise and do. Therefore, the Board of Directors being responsible for the conduct of the business of a company are liable for any non-compliance of law and such liability shall be upon the individual directors also. Section 56(1) and 56(3) read with section 56(4) imposes the liability for the non-compliance of the said provisions, on the company, every director, and other persons responsible for the issuance of the prospectus.

The liability for non-compliance of section 60 of the Companies Act, 1956 is on the Company, and every person who is a party to the noncompliance of issuing the prospectus as per the said section. Further, the directors of a company are also liable for action in case of contravention of the ILDS Regulations. 14. Mr. Saugata Basu through has Advocate has submitted that he has never induced anybody to invest money in NCRDs or issued any prospectus or offer document or advertisement soliciting money from the public. According to him, the decision making power was in the hands of Mr. Subham Bose and Mr. Anindyo Paul. He also submitted that he was only an employee of DURDL and all the employees of the company were designated as Directors cum employees as a precondition to get the service and / employment in the company. He further submitted that he had resigned from the directorship of the company since July 4, 2013. In this regard, I note that as per Mr. Saugata Basu’s submissions he knowingly accepted the position of a director of the company when he accepted the employment of DURDL. It is also important to note that he has never challenged his appointment as a director before any court of law.

Thus, if it is his claim that he was fraudulently named as a director in the guise of employment with DURDL, he ought to have challenged the same before a court of law, which he undisputedly failed to do. He has also submitted that he resigned from DURDL since July 4, 2013, however, he has not provided any evidence in support thereof. It is an undisputed fact that DURDL made the allotment of NCRDs during FY 2012-13 (78 allottees) and 2013-14 (14 allottees). Even if his submission regarding resignation on July 4, 2013 is accepted, he was undisputedly a director of DURDL during FY 2012-13 i.e. the financial year when DURDL mobilized 79,11,500 from 78 investors. In view of these facts and the roles and responsibilities of directors discussed hereinabove, I find that Mr. Saugata Basu was also responsible for the violations of DURDL in this case. 15. There is no dispute as to the fact that Shri Subham Bose, Shri Anindyo Paul, Shri Koushik Dutta, Shri Debraj Mitra, Shri Saugata Basu, Shri Rana Sikdar were the directors of DURDL at the time when DURDL authorized the issuances of NCRDs to the investors.

The board of directors of DURDL at the time of the above mentioned issuances of NCRDs being in control of its affairs, was under an obligation to ensure that these issuances were in compliance with all the applicable provisions of the Companies Act, 1956 and SEBI Act/Regulations/Guidelines. In my view, the above named directors of DURDL at the time of the above mentioned issuances are also "officers in default" as defined under section 5 of the Companies Act, 1956 read with section 2(60) of the Companies Act, 2013. I, therefore, find that the above named directors of DURDL are also responsible for its acts and omissions of DURDL in this case. 16. Considering the above, I find that in respect of the issuances of NCRDs by DURDL during the financial years 2012-13 and 2013-14, DURDL and its directors have failed to comply with the above-mentioned provisions of Companies Act, 1956 (read with the corresponding provisions of Companies Act, 2013) and ILDS Regulations. 17. It is important to mention that one of the consequence of the aforesaid non-compliance/violations is refund/repayment of subscription money to the allottees with interest as provided in section 73read with section 56 of the Companies Act, 1956. With regard to liability to pay interest on the subscription money, I note that as per section 73 (2) of the Companies Act, 1956 read with section 40(3)(b) of the Companies Act, 2013, the company and every director of the company who is an officer in default is jointly and severally liable, to repay all the money with interest at prescribed rate.

In this regard, I note that in terms of rule 4D of the Companies (Central Government's) General Rules and Forms, 1956 read with rule 3(c) of the Companies (Prospectus and Allotment of Securities) Rules, 2014, the rate of interest prescribed in this regard is 15%. Accordingly, DURDL and its directors namely, Shri Subham Bose, Shri Anindyo Paul, Shri Koushik Dutta, Shri Debraj Mitra, Shri Saugata Basu, Shri Rana Sikdar are liable to pay interest to the investors (allottees/holders of NCRDs) at such statutory rate of interest.

18. It is observed from the MCA website that the company has created a charge of 50 Crore on January 31, 2012 in favour of Dolphin Debenture Trust (represented by its trustee viz. Shri Sumit Jana) having address at 46/31/1, Gariahat Road, 4th Floor, Ballygunge, A C Market, Kolkata, West Bengal, India – 700029. It is an undisputed fact that during the time of impugned issues and allotment of NCDs, Dolphin Debenture Trust / Shri Sumit Jana was acting as the Debenture Trustee of DURDL and Shri Sumit Jana was responsible for the affairs of Dolphin Debenture Trust at the relevant point of time. It is also an undisputed fact that Dolphin Debenture Trust /Shri Sumit Jana was never been registered with SEBI as a debenture trustee and that it acted on behalf of DURDL as a debenture trustee. In view of the above, I find that Dolphin Debenture Trust (represented by its trustee, viz. Shri Sumit Jana) has acted as an unregistered Debenture Trustee in violation of section 12(1) of the SEBI Act read with regulation 7 of SEBI (Debenture Trustees) Regulations, 1993. 19. In view of the foregoing, I, in exercise of the powers conferred upon me under sections 11, 11(4), 11A and 11B read with section 19 of the SEBI Act, hereby issue the following directions: i. DURDL and its directors viz. Shri Subham Bose, Shri Anindyo Paul, Shri Koushik Dutta, Shri Debraj Mitra, Shri Saugata Basu and Shri Rana Sikdar shall within a period of three months from the date of this order, jointly and severally refund the money collected through issuances of NCRDs to the investors with interest at the rate of 15% per annum from the date of receipt of money till the date of such refund or the redemption value as promised and accrued till the date of refund, whichever is higher. ii.

Such refund shall be made only in cash through a Demand Draft or Pay Order. iii. DURDL and its directors viz. Shri Subham Bose, Shri Anindyo Paul, Shri Koushik Dutta, Shri Debraj Mitra, Shri Saugata Basu and Shri Rana Sikdar shall within fifteen days from the date of this Order submit to SEBI complete details of their assets (alongwith proofs thereof) certified by a peer reviewed Chartered Accountant. iv. DURDL and its directors viz. Shri Subham Bose, Shri Anindyo Paul, Shri Koushik Dutta, Shri Debraj Mitra, Shri Saugata Basu and Shri Rana Sikdar are permitted to sell the assets of the company and deposit the sale proceeds in an Escrow Account opened with a nationalized bank. Such proceeds shall be utilized for the sole purpose of making refund/repayment to the investors (holders of NCRDs) till the full refund/ repayment as directed above is made. v. DURDL and its directors viz. Shri Subham Bose, Shri Anindyo Paul, Shri Koushik Dutta, Shri Debraj Mitra, Shri Saugata Basu and Shri Rana Sikdar shall issue a public notice, in all editions of one English national daily and one vernacular daily with wide circulation, detailing the modalities for refund, including details of contact persons including names, addresses and contact details, within fifteen days of this order. vi.

Within seven days of completion of refund/repayment as directed hereinabove, DURDL and its directors viz. Shri Subham Bose, Shri Anindyo Paul, Shri Koushik Dutta, Shri Debraj Mitra, Shri Saugata Basu and Shri Rana Sikdar shall file a certificate of such completion with SEBI from two independent peer reviewed Chartered Accountants who are in the panel of any public authority or public institution. Such certificate shall be issued by the Chartered Accountants after verifying the relevant documents including bank accounts of the said entities and satisfying themselves that the refund has actually been made. vii. For the purpose of this order, a peer reviewed Chartered Accountant shall mean a Chartered Accountant, who has been categorized so by the Institute of Chartered Accountants of India. viii. DURDL and its directors viz. Shri Subham Bose, Shri Anindyo Paul, Shri Koushik Dutta, Shri Debraj Mitra, Shri Saugata Basu and Shri Rana Sikdar are restrained from, directly or indirectly, accessing the capital market by issuing prospectus, any offer document or advertisement soliciting money from the public and are further prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly, in whatsoever manner for a period of four years or till the date of refund of money to the investors (holders of NCRDs) whichever is later.

ix. Shri Subham Bose, Shri Anindyo Paul, Shri Koushik Dutta, Shri Debraj Mitra, Shri Saugata Basu and Shri Rana Sikdar are also restrained from associating themselves with any listed public company and any public company which intends to raise money from the public, for a period of four years or till the date of refund of money to the holders of NCRDs, whichever is later. x. Dolphin Debenture Trust and Shri Sumit Jana are also prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly, in whatsoever manner for a period of four years.

xi. For the purposes of paragraphs 19(viii), 19(ix) and 19(x) the period of restraint shall be counted from the date of the interim order. 20. The interim order cum show cause notice dated May 27, 2015is disposed off accordingly. The above directions are without prejudice to the right of SEBI to take any other appropriate action for the violations found in this case or to initiate any action in case of failure to comply with the above directions, in accordance with the provisions of applicable laws including the proceedings under the provisions of section 28A of the SEBI Act. 21. The order shall come into force with immediate effect. A copy of this Order shall be forwarded to the recognized stock exchanges and depositories for information and necessary action. 22. A copy of this Order shall also be forwarded to the Ministry of Corporate Affairs/concerned Registrar of Companies for their information and necessary action.

Sd/-

DATE: October 27th, 2016 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA